Here we Go!

[Culture]

After two years of discussion, my wife and I have decided to take out first baby step towards ER. We have decided to both quit our jobs on January 15, 2008, and start a consulting practice working out of our home. The hope is for the wife to work 15-20 hours per week and myself 30-40. Currently, the wife works 40-45 hours/week plus about 7 hours commuting, and I work 45-50 plus about 10 hours commuting. While we expect this to involve a 30-50% pay cut, we expect all current living expenses to be covered by our work, leaving our investments to grow untouched.

We made the first concrete step this week, meeting with our insurance broker to discuss E&O insurance, health insurance and the impact of a home business on our homeowners policy. We meet next week with an attorney to discuss setting up a LLC. We have lots of work to do, and are getting very excited about it. Our current plan is to slip into full time ER in about 5 years when our child enters college. We will be about 48 at that time.

While this may not sound like much to those of you who have already done it, for those who have not, it was a very tough psychological barrier to agree to cut our income by 50%. However, now that the decision has been made, we have become very comfortable with it. We will see if this last at the countdown moves closer.

 

[samclem]

Congratulations--I think. It's hard to know from your post, but on the face of it, it sounds like you're taking a bit of risk here. Are you doing any consulting already (on the side), or are you going to quit getting a paycheck one day and start consulting the next day? If you know you don't have enough today to ER and you believe that your consulting biz will bring in 50% to 70% as much, nd you believe your investments will grow enough in 5 years (with no further input) to allow you to retire, it sounds like two things have to happen for this plan to work:
- The consulting business must be successful
- The growth of your investments must meet your expectations

Of course, if work is ruining your life now, you have a "lock" on this consulting stuff, and you're assuming your investments will grow at 3% annually over the next 5 years, then your plan sounds very prudent. Is working another 2-3 years and banking the 30-50% difference in income an unattractive option?

 

[Culture]

Yeah, I really did not give a complete picture of the situation. We are effective FI with respect to our current spending, with a WR of about 3.5% including tax and healthcare. However, we desire higher spending in retirement, and we are a little paranoid about our portfolio last 50 years. Opening our own business will allow our portfolio to grow (hopefully!) untouched for 5 more years until we actually retire fully. We are budgeting spending of 1.67 times our current spending in retirement, and would like to do this with a 3.5% WR. Thus, we need the portfolio to grow about 1.75 times is current size. This will almost certainly not happen in five years, so we will most likely have to cut back on our bloated retirement budget when we actually retire fully. This is not a problem as the current budget is definitely pie-in-the-sky.

With respect to opening a consulting business, I currently work as a consultant for a large firm. My clients are my own. While I will lose large (and prestigious ) projects that cannot be staffed by a single person firm, I am confident I will maintain all of the small and medium sized projects, which make up about 67% of my current workload.

I actually like my current position/company, we just spend too much time away from home. The first suggest was for the wife to quit so we could free up weekend time by getting the domestic stuff done during the week. The wife counter-offered by suggesting that I quit and do the domestic stuff and she continues to work. The current consulting company is a compromise .

 

[joesxm3]

Re: derailed by divorce

re: derailed by divorce.

Being a single guy I have the opposite problem. Anyone have any thoughts on the effect of getting married on ER plans?

Assuming the new wife had some sense of LBYM I would imagine costs to increase by 50% or less. If she had some assets maybe it would be a wash.

 

[W2R]

Re: derailed by divorce

re: derailed by divorce.

Being a single guy I have the opposite problem. Anyone have any thoughts on the effect of getting married on ER plans?

Assuming the new wife had some sense of LBYM I would imagine costs to increase by 50% or less. If she had some assets maybe it would be a wash.

I am divorced as well. I have NO intention of re-marrying again, for several good reasons. Neither does my dear friend Frank (and this is one of many things that we have in common, which inspired us to get together). Each of us has had to start over, and neither of us wants to risk having to do it again in our 50's. For us, it is simple (for example, kids are not in the picture for us).

Even if your new wife had some sense of LBYM, isn't it a bit cold to approach the marriage with the intention of taking advantage of her assets? And if your money is mixed, the difficulties of LBYM can easily lead to disagreements about how money is spent.

I'd suggest not marrying unless it is so important to you that you don't care if ER is delayed. Then if it isn't, you'll be happy and no matter what happens, you won't be disappointed.

 

[Culture]

Re: derailed by divorce

Anyone have any thoughts on the effect of getting married on ER plans?

Well, it depends on many, many, many things. You must compare the following factors for you and your spouse:

Income
Assets
Expected standard of living
Expected retirement date
Children and attitudes toward economic support for grown children.

I do not think any generalizations can be made here. My suggestion is marry a soul mate and don't worry about it. That is what I did.

 

[joesxm3]

Re: derailed by divorce

I didn't mean marry her for her money, but shouldn't she pay her way?

What would you recommend if two single people partnered up long term without marriage? Some sort of split expenses, maybe prorated based on relative assets?

I would think combining expenses would keep the total lower than if separate and would make sense.

I figure that ER would be much more enjoyable with a partner to share it with, especially if doing traveling.

 

[W2R]

Re: derailed by divorce

I didn't mean marry her for her money, but shouldn't she pay her way?

What would you recommend if two single people partnered up long term without marriage? Some sort of split expenses, maybe prorated based on relative assets?

I would think combining expenses would keep the total lower than if separate and would make sense.

I figure that ER would be much more enjoyable with a partner to share it with, especially if doing traveling.

So, to share it with a partner, do you have to share expenses or live together? She may have some other vision of what paying her way is, than you have. Also you might THINK sharing expenses would keep the total lower, but do you really want to count on it?

Frank and I don't see things quite that way. When we RE, we plan to keep our expenses separate and to continue living separately. But we are a couple, and committed to one another, and we plan to continue spending a lot of time together in ER as we do now. It's an unconventional arrangement, but it works for us.

There isn't any perfect answer for all couples, but this is one alternative that is more common than you might think.

 

[W2R]

After two years of discussion, my wife and I have decided to take out first baby step towards ER. We have decided to both quit our jobs on January 15, 2008, and start a consulting practice working out of our home. The hope is for the wife to work 15-20 hours per week and myself 30-40. Currently, the wife works 40-45 hours/week plus about 7 hours commuting, and I work 45-50 plus about 10 hours commuting. While we expect this to involve a 30-50% pay cut, we expect all current living expenses to be covered by our work, leaving our investments to grow untouched.

We made the first concrete step this week, meeting with our insurance broker to discuss E&O insurance, health insurance and the impact of a home business on our homeowners policy. We meet next week with an attorney to discuss setting up a LLC. We have lots of work to do, and are getting very excited about it. Our current plan is to slip into full time ER in about 5 years when our child enters college. We will be about 48 at that time.

While this may not sound like much to those of you who have already done it, for those who have not, it was a very tough psychological barrier to agree to cut our income by 50%. However, now that the decision has been made, we have become very comfortable with it. We will see if this last at the countdown moves closer.

Congratulations! I can relate to your strategy. Since the nestegg can continue to grow untouched while you work part-time, this seems like one way to get out of the rat-race a little early.

 

[Nords]

Re: derailed by divorce

I didn't mean marry her for her money, but shouldn't she pay her way?

Good luck with that.

Those type of questions generally fall into the category of "You'll know it when you see it, and if you have to ask then it'll never work."

 

[donheff]

Just dropping in here so maybe I missed something. How did "...Here we go" get conflated with "Derailed by divorce?"

 

[kaudrey]

donheff- I was wondering the same thing!

Karen

 

[Dry Socks]

Just a quick thought on the consulting business. Have you asked any of your potential customers if they'd switch to working with you directly ? What if they won't or can't ? Maybe it's tough to get new vendors approved.

Will your old company take you back or does competing with them mean you burned your bridges ?

Sorry for the downer post

 

[Jay_Gatsby]

Re: derailed by divorce

I didn't mean marry her for her money, but shouldn't she pay her way?

What would you recommend if two single people partnered up long term without marriage? Some sort of split expenses, maybe prorated based on relative assets?

I would think combining expenses would keep the total lower than if separate and would make sense.

I figure that ER would be much more enjoyable with a partner to share it with, especially if doing traveling.

I agree with you. She SHOULD pay her own way, even as your wife, since you are a "partnership". I advocate discussing in detail how your finances as a couple will be handled if you were to get married. Your discussion should include both short-term and long-term financial goals, whether you plan on having kids (and how many), who would stay home, etc... Leaving things to work themselves out is a poor strategy, since in many cases they simply don't, thereby leading to divorce.

As anecdotal evidence of a need for the foregoing, one of my younger brothers got engaged to a woman who clearly had an agenda. He didn't earn much money, but had inherited some from one of our relatives. She thought he would use that money as a down payment on a house for them, purchase a new car (for her), and finance her ability to quit her job (she earned more than him!) and stay home with the kids. Needless to say, when I advised him that he should require her to put up half the money for the foregoing, and not be so eager to quit her job, she immediately had nothing positive to say about me (and quite a few negative things). Eventually, my brother saw her for what she was and called off the engagement. She was VERY pissed at me, and still is to this day. Frankly, I don't care.

 

[Moemg]

Re: derailed by divorce

So, to share it with a partner, do you have to share expenses or live together? She may have some other vision of what paying her way is, than you have. Also you might THINK sharing expenses would keep the total lower, but do you really want to count on it?

Frank and I don't see things quite that way. When we RE, we plan to keep our expenses separate and to continue living separately. But we are a couple, and committed to one another, and we plan to continue spending a lot of time together in ER as we do now. It's an unconventional arrangement, but it works for us.

There isn't any perfect answer for all couples, but this is one alternative that is more common than you might think.

Doesn't it add a lot to the budget to have two households??

 

[W2R]

Re: derailed by divorce

Doesn't it add a lot to the budget to have two households??

I guess that really depends on a lot of factors. I know I don't have to buy a single blessed thing unless I actually, personally want it, for example. The same is true of him and I fully expect his living room in retirement to be "furnished" with ham radio equipment instead of Ethan Allen. It is now.

We each earn a decent income, and we are planning to retire in SW Missouri, where I can buy the kind of house I want for very little ($150K?), and he can buy the kind of house he wants for even less ($110K?).

We each own paid off homes here in New Orleans right now that are worth more than that, and they are within about 1-2 miles of each other. It's nice and this seems to work out beautifully for us. We both enjoy "alone time" and we don't need huge homes to find it (since we both live alone).

We'll do just fine. 8)

 

[Nords]

Re: derailed by divorce

Doesn't it add a lot to the budget to have two households??

You bet, especially when your spouse sells all your bachelor furniture!

Oh, you mean adding a lot of expenses to the budget. Yeah, I guess it could do that too.

 

[Spanky]

Re: derailed by divorce

Doesn't it add a lot to the budget to have two households??

Most likely, but the reward is freedom.

 

[haha]

Whenever I hear about that book Your Money or Your Life I think of marriage vs. divorce.

Ha

 

[Culture]

Just a quick thought on the consulting business. Have you asked any of your potential customers if they'd switch to working with you directly ? What if they won't or can't ? Maybe it's tough to get new vendors approved. Will your old company take you back or does competing with them mean you burned your bridges?

I have not directly ask my clients as I do not want anything getting out on the street, but in the industry I work, the clients hire individuals, not companies. I am certain I will not have problems with them following me.

My current employer has a history of taking back employees. The theory has been 1) they are a known quantity and 2) they already know that in fact, the grass is not greener.

 

[W2R]

Re: derailed by divorce

Most likely, but the reward is freedom.

Good point. Freedom is important when both partners are strong-willed individuals.

Freedom comes in many forms. For example, I feel free to save energy by turning off the A/C in my house in the spring and fall, whereas he would rather keep his house quite cold. If we lived together, I would be nagging him about it mercilessly at every opportunity, believe me. Since we live apart he's free of the nagging, and I'm free of the bills. I also don't have to define myself (to myself) as a nagger. Also, the total energy bills for these two small houses are less than would be needed for a larger home. I suppose that if we lived together, we'd have to have dual A/C installed in separate parts of the house. More expense. And why? Our relationship is about enjoying one another's company, not about such mundane silliness, and we have wonderful times when we are together. We know that when we are together, it is by mutual desire and we have better ways than this to occupy our time.

Compromise isn't free, either.

Have you ever watched "Designing for the Sexes" on HGTV? The compromise designs that they come up with are often absolutely beautiful, but I always have the nagging suspicion that they are many times as expensive as the total cost of both partners' individual design concepts would be, if realized in separate homes.

Ever have a partner throw out something of yours, or put something away in a place where it cannot later be found, so that the item must be replaced? Ever pay a late fee or a bounced check fee because you didn't know something your partner did or didn't do? None of this happens to us, ever.

 

[Moemg]

I had an uncle who had a girlfriend for twenty years. They also lived in separate abodes. Finally after twenty years he married her.He died within a year .Did the nagging do him in

 

[Nords]

Whenever I hear about that book Your Money or Your Life I think of marriage vs. divorce.

It reminds me of Jack Benny: "I'm thinking, I'm thinking!"

 

[haha]

I had an uncle who had a girlfriend for twenty years. They also lived in separate abodes. Finally after twenty years he married her.He died within a year .Did the nagging do him in

He might have married her knowing he was sick, in order to get better treatment for any estate left to her.

Ha